The gap between house price inflation and wage inflation is widening. But the latest house-price figures show prices are slowing which might spur youngsters on to get on the ladder. The first challenge is to raise a decent deposit. If you’re serious about home ownership you need to be committed to squirreling money away. The average first-time buyer in England now needs £22,689 in savings to afford the upfront costs on an average house. Here’s a series of budgeting tips to raise the all-important deposit:
1 Crunch the numbers
You won’t know exactly how much you need to save until you know the price of the property you’re buying and how much you can borrow. But you can hazard a rough guess and set yourself a goal.
2 Spend some quality time with your bank statements
Work out what comes in… and what goes out. If you think there’s too much going out (unnecessarily), identify a few things you could cut out. Perhaps your daily £3 take-away coffee habit could be replaced with a weekly one. Or you might finally give in and cancel the gym membership you never really use. If frittering is a weakness, keep a diary of everything you spend for a couple of weeks and see where you can make cuts. You might surprise yourself on how much you can save.
3 Go on a switching spree
Cut the cost of all your bills. Find out the cheapest energy deal by digging out a bill and using the monthly repayments along with your postcode to generate a list of the top value deals on GoCompare.com or https://clk.omgt1.com/?PID=36207&AID=1097372. You might also want to save on your mobile phone if you feel you pay too much each month. Billmonitor.com, the comparison service, is approved by the watchdog Ofcom, and can calculate the right tariff for your needs by monitoring your usage.
Make sure you don’t just settle for renewal quotes from insurers for car and home cover. Most of the time insurers will add to the premium and rely on the fact that many people don’t notice and let it automatically renew. Don’t fall into this trap – be ready to compare the price and switch to save money.
4 Consider moving
Saving while paying rent is difficult – especially for those who live in cities where rent is pricey. Consider moving to a cheaper place while you save. It will be a short-lived sacrifice for a longer-term gain. You might also opt to live with family for a little while and pay vastly reduced rent. This only works if you have relatives near where you work. There are some quirkier options too; you could become a property guardian. Property guardians act as unofficial security guards for empty commercial – and on occasions residential – buildings. You get hugely discounted rent, although it’s referred to as licence fees. The draw of becoming a property guardian is that they typically pay around 50% less than market rates to live in homes often bigger and grander than they could otherwise afford. Rents include council tax and utility bills, freeing up cash they can squirrel away.
5 Make your savings work harder
With the money you manage to save, make sure you are earning as much interest as possible. The ill effects of low interest rates means that there’s not much up for grabs. But make sure you’re earning as much as you can. Check moneyfacts.co.uk for the highest paying accounts.
There are also some government backed schemes that are worth considering. The Help to Buy Isa allows savers to deposit up to £1,200 in the month they open the account and a further £200 each month. Each £200 will be rewarded with a £50 bonus at the end of the scheme, as long as the money is used to purchase a property. The bonus is available on properties worth up to £250,000, or £450,000 in London.
Alternatively save in a Lifetime Isa, which allows you to save up to £4,000 a year and receive a government bonus of 25%, up to a maximum of £1,000 – until you reach the age of 50. So for every £4 you save, the government will give you £1. The bonus is available on properties worth up to £450,000 anywhere in the UK. Find out more about Lifetime ISAs here.